Perry is right about that. Being a WVAS provider in China is basically a license to be stolen from.
Where I fear Perry may be wrong, though, is that he sees no way out of the quagmire. He sees WVAS providers as dinosaurs after the meteor impact: the Great Die-Out is coming.
There are, in fact, two things that, when taken together, can save the WVAS players. It won't work for all of them, but it will allow them to continue to exist, consolidate, and build independent, profitable businesses, which is a good thing for reasons I'll go into below.
It Takes More Than Two, Baby
Part of the problem is that there are only two mobile operators in China, one of which is so large (China Mobile) that the only reason it doesn't sit on the other (China Unicom) and crush it out of existence is the old saying "better the devil you know than the devil you don't." China Unicom makes it possible for China Mobile to swear with deepest sincerity that it is NOT a monopoly. (The same reason, IMHO, that Bill Gates invested in Apple back in 1997 - he couldn't afford NOT to have a credible commercial competitor.)
But as we
rot hover on the brink of a decision about the granting of third generation mobile licenses in China, it seems possible, if not likely, that there will be at least one and possibly two more wireless mobile providers within a year two years in the not terribly distant future. Assuming the WVAS can hold on that long (and surely the better financed of them will), they will be in a much improved position at the bargaining table.
The investments and technical challenges implicit in a 3G rollout, not to mention the pressure of intensified competition, are likely to compel operators to focus their resources on building and running the network, not creating mobile media and services. It will also put pressure on the operators to offer more (if not better) services to match those of the competition. If competition is healthy, it will be good for the WVAS providers.
The problem, of course, is the MII's studied indifference to committing to 3G licenses in the first place. This is not good news for the WVAS providers who have the smaller bank accounts - they are less able to wait out the bureaucrats (actually, the resolution of TD-SCDMA's technical problems) and thus at somewhat greater risk than their better capitalized cousins who are supported by other healthy businesses.
I Want My KongZhong
Operator competition alone won't be enough, although it is a necessary prerequisite. What really can save the WVAS' pastrami is the users themselves. But the providers have to make that happen.
You see, the one thing none of these providers have done is create services with such power among consumers that users will insist on or indeed expect them to be available regardless and wouldn't think of buying a phone without one. I'm not talking about generic services like SMS or WAP, but about services that have unique content that is elegantly delivered to targeted users that have (or create) deep connection and meaning with users.
(See? I never used "brand" once in that paragraph. And I'm better for it. Am I the only marketer on the planet who believes the word "brand" should be expunged from any credible business document?)
Back in the early days of cable TV, people went looking for the news channel, the movie channel, the sports channel, the public access channel. Whatever. Our movie channel in West Los Angeles was The "Z" Channel, so named because the channels on the selector box were all assigned letters of the alphabet, and under the letter Z was the channel with the movies.
But not long into the 1970s a bunch of young hotshots came up with a movie channel that they called "Home Box Office." What made Home Box Office great was not its brand or its name, but the fact that the movies were better, the channel was better produced, and they really seemed to get why people liked movies. HBO became a "brand" because of these things, and now no self-respecting cable operator on the planet outside of the PRC would dare NOT offer HBO as a premium service.
What the WVAS providers need to do is to create their HBOs, their MTVs, their CNNs, their Discovery Channels. They need to create services that are so good and engender such passionate following no operator would dare leave it off of the menu.
Can they do it? I have my doubts. Leaving aside the issue of requisite skills and access to content, many of the WVAS providers are small and can't afford the investment in development and marketing that building services with deep customer affinity would require. Even the ones that could afford the effort would require such a leap in skill and imagination as to make it difficult to imagine. But if, out of all of the competitors even a single provider manages to make the leap, it will change the game.
The really smart ones will not try to go it alone. They'll hook up with partners that already have deep consumer affinity in their own rights and need help creating a mobile offering. Creating such unions among providers and partners willing to experiment a little to get the mix just right seems right now to be the best way forward, if not the only way.
It's Either Wolf's Way or Wu's Highway
But here's the point: they have to try. Because failure to try to build a service that brings the indisputable power of user demand to the bargaining table will effectively consign the entire sector to the recycling bin.
The clock is ticking. Every day these companies hold off on making the investment to build truly powerful mobile media properties brings them closer to the end.
Frankly, deep down in places we don't like to talk about at parties, we NEED the independent WVAS providers. The operators have demonstrated genuinely world-class network planning, rollout, and management skills. They have been embarrassingly bad at the softer side of the business, and it doesn't look like they're getting any better.
If no compelling services, created by companies who are really good at such things, actually emerge over the next 24 months, 3G is doomed in China as anything more than a device to get more voice calls onto less bandwidth, and the mobile carriers will be watching their ARPUs fall through the basement as they struggle to grow among the bottom 2/3 of China's income pyramid.
In a nation where mobile phones offer the power of the Internet to people who will never be able to afford a computer, and the promise of greater connectivity to the people who drive China's global competitiveness, such an outcome would be a serious shame.
I'm rooting for the WVAS providers.
I only hope they wake up in time.